insert teeth-gnashing here

[vsp]

Originally posted by glatt
Remember that financial advice from strangers on the internet is the best advice you can get.

Well, I'll look at it from a few perspectives...

According to the typical 28/36 rule:

~68K * .28 / 12 = $1536 per month front-end (% of gross).
~68K * .36 / 12 = $2040 - $225 (car payment) = $1815 per month back-end (debt-to-income).

We have no credit card debt or outstanding loans at all; at present, apart from typical utilities and insurance, our only month-to-month bill is my car payment, $225 a month. However, that's right now, and I have to anticipate other debts down the road that'll affect this. My wife's car is paid for, for instance, but if it wears out in a couple of years we'll have to add a second car payment in, and (again) there's the what-if-we-have-kids factor.

According to the "2.5x" income rule, I should be aiming at something around 170K. Rolling that through Freddie Mac's calculator comes out with ($959 principal/interest) + ($217 taxes/insurance) + ($89 PMI) = $1265 per month, which would be within my anticipated target range. The trick is finding a single-family home at 170K that isn't in a bullets-flying-overhead neighborhood.

Now, I don't know what your wife's portion of that is, and how long she will be out of the workforce raising kids. But you are in much better shape than most people.

Oh, I agree that things could be a lot worse... but I also have to account for the fact that they could get worse than they are now. My income is about double what my wife makes, maybe more like 2.2:1, so any change of employment for me would be more critical than for her... but kids mean that debt goes up dramatically and her working hours drop off at least temporarily. I'd just as soon not lose the house via reproduction. Likewise, if I change jobs (voluntarily or not), I expect to take a hit.

One place where I'll gladly admit that I'm an amateur is the repercussions on my 1040 form. It's one thing to speculate on how much interest (or other things) would be deductable, but it's another to sit down and actually work out what the increase in my refund might be.

[jaguar]

I don't have much to do with the US property market but from what I hear it's fairly inflated but as badly as the UK market (which is giving a fair few fund managers a nervous twitch at the moment). Remember that overinflated property can go DOWN in value, people always assume property appreciates and in the right timeframe that is usually true but in the wrong one you can end up down, property is not the perfect safe investment some people still think it is.

Also best, as a rule of thumb to keep those kind of payments below the 50% mark at all times.

[glatt]

The federal income tax ramifications are huge.

When my wife and I were living in an apartment, we were dual income - no kids. Taxed out the wazoo.

Now we have two kids, and my wife stays at home raising them. On top of that, I am deducting almost the entire amount of my monthly payments on the house, because it's all still interest now. (You pay most of the interest off before you you pay down the equity on the house.) What it all boils down to is that I am almost embarrassed how little I pay in federal taxes. I think my tax rate works out to maybe 5-10%. I don't know because I don't have my tax forms in front of me. But it's nothing.

I don't know how PA rates compared to other states as far as taxes go. I live in Virginia, and pay FAR more in state taxes than I do federal. And Virginia is pretty good about taxes.

One excellent thing is that you make much more than your wife. You won't miss her salary nearly as much when she stays home to raise the kids.

I bought my house 7 years ago. It seemed expensive then, but the monthly payment now is less than a two bedroom apartment is. It's cheaper for me now than if I had stayed in our old apartment.

[phillybilly]

but once a city rat-always a city rat!

For those of you who never lived in the city and grew up in the burbs, it would be culture shock, as if you moved to a foreign country.


I guess the same would be said for me if I moved to the burbs then.....My Older brother moved to Havertown about 6 years ago....EVERY time I go out there and it starts to get late, DAMN it's just to quite for me.....I need the rumble of traffic, the screaming of neighbors...etc...

Oh well......Later!

[xoxoxoBruce]

but once a city rat-always a city rat!

Thank God for that.

[smoothmoniker]

You can't get a house within two hours of Los Angeles for less than 400k. You can't get one you'd want to live in for less than 500k.

It's brutal. My wife and I flipped in an out of a house within a year because of the heat of the market. I think it's ready to crash, so we took our profit on a house we never even moved into, and are renting until the correction.

At which point I'm guessing my money will buy twice the house.
-sm

[jaguar]

I'd be surprised if the correction was that large, of course specific areas might cop it fairly damn hard.

[lumberjim]

vsp, take a look into coatesville.



as far as housing inflation goes, that is usually tied to interest rates. people are payment buyers. if your mortgage of 150000 yeilds a 997.95 payment for 30 yrs at 7% and 186,000 at 5% is 998.49/mo, you can get a better house for the same money.

watch the 10 yr note as that directly impacts mortgage rates.

it is starting to rise, so housing prices should begin to correct soon. if you plan to be in your house long term, it is somewhat irrelevant, but you could be upside down if you try to move early and rates have, in fact, gone back up.

[wolf]

Originally posted by lumberjim
vsp, take a look into coatesville.

If you do so, please first contact me regarding various home defense options.

[lumberjim]

not central coatesville. stay above 10th ave, and you're fine.....actually, there are many new developments poping up in the burbs there for decent prices. 150's and up for new construction on 1/4 acres lots...not bad

[wolf]

The problem with these new developments where people have things like money, jobs, tv's, dvd players and jewelry, is that they are within easy robbing distance of the 'expected to be bad' parts of town.

[vsp]

The problem with Coatesville is that I'd never get any sleep. I'd lie awake at night, fearful that someone would break in during the night, throw a burlap sack over my head, drag me away and build a golf course where my house used to be.

[jinx]

You realize they closed the Oak Street public housing close to a decade ago right? Moved all those folks to West chester... it's just not scary on the East end. We lived there for years, often forgetting to lock the doors at night, jim working late hours etc. Never had any problems, never had anything stolen. It was a good investment for us.


Nice twin


New construction

[Catwoman]

House prices where I live (Bournemouth, England) are ridiculous. Avg cost of a 3-bed semi is around £400K ($700K). And salaries are far from in line with this. Think I'll just rent forever, or go and live in a beach hut (although one such 3-foot wood hut went recently for £120K, about $170K)

[Happy Monkey]

One bedroom condos similar to mine have been selling for $275K to $315K recently. I paid $110K 5 years ago. It is, for lack of a better word, insane.